Fortinet Sees AI Fueling Firewall Demand as Supply Advantage Fades

Key Points

• AI, infrastructure upgrades and operational technology risks are supporting firewall demand, while Fortinet expects to replace pandemic-era devices as customers adopt more powerful hardware.
• Fortinet’s early-2026 inventory helped it meet demand and gain share, but that supply advantage is fading as component lead times lengthen and costs rise. The company is adjusting prices while targeting gross margins of around 80%.
• Fortinet lowered its 2026 services growth assumption to 13% from 14%, partly because large enterprise customers are delaying service activation. CFO Christiane Ohlgart expects services growth to be higher in 2027.

Fortinet NASDAQ: FTNT expects demand for firewall and security products to remain supported by artificial intelligence, infrastructure upgrades and operational technology risks, even as it faces tougher comparisons after an unusually strong first half of 2026, Chief Financial Officer Christiane Ohlgart said.

Speaking at an investor event, Ohlgart said Fortinet benefited early in the year from inventory that allowed it to meet demand from its own customers and take business from competitors facing supply shortages. She described the second half as more normalized, with longer lead times and higher costs reducing that advantage.

Ohlgart declined to provide 2027 guidance but said Fortinet remains confident about growth over the next several years. The company’s goal is to outgrow the market, she said, adding that its growth is largely organic because it does not make large acquisitions.

Firewall demand and pricing

Unlike the pandemic period, when companies primarily upgraded infrastructure to support remote access, Ohlgart said the current market has a broader set of drivers. These include securing AI, customers seeking more control over infrastructure and growing interest in operational technology security.

Fortinet also sees opportunities to replace devices purchased during the pandemic, she said. Customers may upgrade earlier as new features require more powerful hardware. Ohlgart said average selling prices, excluding the effect of price increases, have risen as customers buy higher-end devices within product categories.

Some customers moved purchases forward in 2026 after Fortinet’s sales team warned of rising prices and uncertain availability, Ohlgart said. The company also gained share in the second quarter because it had inventory available.

Fortinet has normal inventory on hand, but its ability to increase production in response to accelerated demand is more limited because component lead times have lengthened, she said. The company’s second-half price increases are higher than those in the first half, and Ohlgart said it has so far seen similar price realization.

Fortinet plans to adjust hardware pricing as component costs change while seeking to maintain an overall gross margin of around 80% across products and services, Ohlgart said. She added that market competitiveness would also influence pricing decisions.

Service outlook and enterprise deals

Fortinet lowered its full-year services growth assumption to 13% from 14%, although Ohlgart said the revised expectation remained above its view at the start of the year.

She attributed part of the change to large enterprise wins in the third quarter. New customers negotiated more time to deploy devices before services began, while some larger service agreements had activation dates outside the quarter. Volume discounts also compressed service pricing relative to hardware spending for large customers, she said.

Ohlgart said she expects services growth to be higher in 2027 than in 2026, pointing to an increase in short-term deferred revenue. She described that measure as a strong indicator of revenue expected to be recognized over the following 12 months.

In security operations, Ohlgart said sales teams had been focused on network-security upgrades, while Fortinet consolidated products into its FortiEndpoint and FortiSOC platforms. She expects the business to normalize as teams focus more broadly on the portfolio, though she did not give a specific timetable.

AI and hybrid security opportunities

Ohlgart identified two immediate AI opportunities: securing enterprises’ use of AI and protecting infrastructure built to support it. Over the longer term, she said, deploying AI in security could help reduce operating costs.

She also highlighted Fortinet’s FortiGuard Inline AI Security Service as an upsell opportunity. The service can inspect traffic for sensitive information submitted to AI tools and help organizations govern usage, she said.

On acquisitions, Ohlgart said Fortinet will continue to pursue smaller deals that can ultimately be integrated into its products. She did not offer an operating-margin forecast, but said the company would continue to invest for growth while maintaining solid margins.

About Fortinet (NASDAQ:FTNT)

Fortinet, Inc. is a cybersecurity and networking company that provides products and services to help organizations protect their networks, devices, applications, and cloud environments. Its offerings include FortiGate next-generation firewalls, the FortiOS operating system, and security, endpoint, cloud, and secure access service edge (SASE) solutions. The company's Security Fabric platform is designed to integrate security and networking products and support centralized visibility and management.

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